Lipton and Zhu at the IMF: Intellectual and Policy Duopoly?

There was a lot of justified hand-wringing and tough talk too in the media and in think tank and NGO-land about the unseemly use by Europe of its unwarranted voting weight at the IMF to push the election of Christine Lagarde. The appointment this week of Zhu Min, a former deputy governor of the People's Bank of China, as the one of two IMF deputy directors—the first time that a Chinese official has held such a post—suggests that Beijing extracted something worthwhile in exchange for backing Lagarde. Equally important, Zhu Min’s appointment shows that China is interested in expanding its influence within the IMF. Power still matters; it’s just that power is shifting.

The appointment of White House economic aide David Lipton was no surprise and ensures that the U.S. preference for minimally managed capitalism (as Alan Beattie nicely argues (gated) will continue to dominate at the IMF. Even with former French Central Bank governors leading the IMF (e.g. Camdessus in the 1990s), it was the U.S. Treasury’s views (via Stan Fischer and Larry Summers) that mattered. And Lipton was Summers’ eyes and ears and mouth too during the Asian financial crisis. Lagarde will surely rely heavily on Lipton for advice. Lipton is smart and sensible. He will help Lagarde avoid seeming to favor German and French banks. Aside from China’s increased influence, the change from Strauss-Kahn and (John) Lipsky to Lagarde and Lipton doesn’t signal a big change at the IMF. (Lipsky and Lipton share not just those first three letters but basic market-friendly economics). For example, the IMF will probably participate in the next round of Greece-rescuing, still as a minority player. With fingers crossed on 19th Street, the can for now will again be kicked down the road.

Ironically, Zhu’s appointment will make Sarkozy’s push for reform of the international monetary system more respectable, if not more likely anytime soon (for radical ideas in clear and careful language on reforming the international monetary system see here). Min Zhu will raise questions about the dollar and about U.S. monetary and fiscal policy that up to now got no traction in the IMF’s economic monoculture. More and different views at the top is a good thing: as with Justin Lin, who as chief economist at the World Bank has been raising awkward (and unpopular) questions about the state’s role in triggering economic growth, going from monopoly to duopoly on ideas about the global economy is a good thing. Let’s hope at both global institutions it reduces the risk of really bad mistakes.